Higher education budget to receive most significant portion of state cuts

As public furor grows over the developing budget crisis, many students are left with one burning question: Why higher education?

The answer is a complicated one with no clear solution.   

Because of a maze of budget restrictions, higher education — and thus the University — is being cut significantly more than other programs throughout the state.

The process for determining how the state distributes money starts with determining how much the state has to spend. That number is calculated by the Revenue Estimating Conference.

The conference includes Gov. Bobby Jindal, Senate President Joel Chaisson, Speaker of the House Jim Tucker and University economics professor James Richardson.

Those numbers are then compared to estimated state spending, as detailed by the state commissioner of administration, to determine the balance.

The state will have an estimated deficit of $1.6 billion next fiscal year. Because the state's total budget this year is $25.5 billion, that's a deficit of about 6 percent.

Louisiana law requires a balanced budget. Because Jindal and many influential state legislators have repeatedly said they will not raise taxes, the only way to find that balance is to cut from state programs.

At first glance, 6 percent may not seem like much, said Robert Keaton, special assistant to LSU System President John Lombardi. But the state can't cut that money across its entire budget because the budget consists of several different sources of funding — and most of those sources can't be easily cut.

The largest piece of the budget pie is $11.5 billion of federal funds, or 45 percent of the budget. Those funds are dedicated by Congress for specific programs — the state can't choose to redirect that money to other purposes and has little control over how those funds are spent.

The second piece of the budget pie is $4.6 billion of dedications, or 18 percent. These funds are raised directly from certain taxes, fees, mineral and gambling revenues and other sources of revenue.

The money raised from these revenue streams are, by law or constitutional amendment, dedicated to certain programs, so that money can't practically be cut.

The third piece of the budget pie is agency fees worth $1.7 billion, or 7 percent. These funds are raised by state agencies and are used specifically by those agencies to fund their budgets.

The only piece of the pie to which the Legislature can practically make cuts is the State General Fund worth $7.7 billion, or 30 percent of the budget.

This is the part of the budget funded by most taxes, and it includes a hodgepodge of services not funded by the three other revenue sources.

But even within the General Fund, there's only so much money the state can touch, Keaton said.

Two-thirds, or $5.1 billion, of the General Fund is marked "non-discretionary," meaning that, over time, the Legislature has attached protections to sections of the General Fund — usually through changes to the constitution.

That leaves only $2.6 billion of the General Fund marked "discretionary," or available to be cut.

When the governor and the Legislature create the current budget, the vast majority of the $1.6 billion possible cut must come from that $2.6 billion discretionary section of the             General Fund.

So instead of evenly distributed cuts across the board, discretionary General Fund programs have to absorb 61 percent of the total cut, causing disproportionately huge cuts to those programs. Other programs suffer significantly less or no cuts.

Higher education and health care make up the most significant percentage of discretionary spending. Higher education makes up 37 percent; health care makes up 29 percent.

Other discretionary spending programs are much smaller; they include the Department of Agriculture, the Department of Labor, most of the State Civil Service and most of the Executive Branch, among others.

The end result of this maze of restrictions is that 90 percent of the state's budget is protected from cuts. So higher education and health care suffer massive funding decreases when times get rough, while most other programs suffer few or no cuts whatsoever.

For example, the state's Minimum Foundation Program, which doles out funding to primary and secondary programs statewide, has not suffered a cent of cuts during the most recent crisis.

The MFP costs more than $3 billion and makes up about 60 percent of the state's non-discretionary general fund budget. Because this sizeable program can't be cut at all, programs like higher education have to take the brunt of the budget cut burden.

There is a constitutional "trigger" that would let some protected programs get cut if the official forecast for the next year is less than the current year. That will not be the case for fiscal year 2011-12.

Keaton said relieving budget pressure on higher education doesn't necessarily require raising taxes or sending more funding — it might just mean more even distribution of budget cuts.

Many of the protections on certain programs are constitutional — removing those protections would require a two-thirds vote of the Legislature and a vote of the people. But some protections require a less politically difficult solution.

Keaton said $1.4 billion of non-discretionary funds is not protected by the constitution but by more easily overturned rules. If that money were moved to the discretionary spending pool, the amount the state could cut would increase to $4 billion — that means those programs, including higher education, would deal with 39 percent of the cut instead of 61 percent.